Monday, June 18, 2007

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Internet longs, Computer longs and Retail longs. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is slightly negative as the advance/decline line is slightly lower, sector performance is mixed and volume is below average. I continue to believe that the 59-basis-point rise in the average 30-year mortgage rate we have seen over the last six weeks, a subsiding in the recent substantial inventory rebuilding and falling energy prices later this year will help bring the 10-year yield back down below 5% during the third quarter. Apple (AAPL) said today that the battery life on its iPhone will be longer than analysts expected. This is a positive, however, I continue to believe many investors are missing the big picture. Any initial glitches or perceived weaknesses in the phone will likely be fixed quickly in future releases. Moreover, any analysis of the iPhone that doesn't compare it with the competition is meaningless, in my opinion. The competition is far from perfect. I still believe that the iPhone will drive a whole new demographic into the stores, which will boost earnings much more than even optimistic analysts expect. Besides Apple, many other true “growth” stocks are substantially outperforming the broad market today. My intraday gauge of investor angst is at above-average levels. I expect US stocks to trade mixed-to-higher into the close from current levels on falling long-term rates, short-covering, buyout speculation and investment manager performance anxiety.

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